On August 13, 2007, I wrote a post discussing the importance of finding Good Reasons To Invest and avoiding hype that media or market participants love to push. If you remember that date last August, the markets were really starting to crumble and we kept hearing about hedge fund losses and redemptions. To allay fears that Goldman’s hedge funds were in trouble, they took a very rare approach and publicly mentioned the names of individual investors Eli Broad and Hank Greenberg and Perry Capital as people who showed confidence by investing $1 billion of new capital in addition to Goldman adding $2 billion of the firm’s money into the Global Equity Opportunities Fund. CNBC and Bloomberg had a great time hyping this story over and over. It was all hands on deck to encourage people not to request hedge fund redemptions and suggest that all was well if the smart guys were adding new money. It worked at the time. For a while. Maybe as long as it needed to avert a crisis.

Except for some light coverage, the media has avoided placing the same attention on the fact that at the end of February Goldman removed 90% of the $2 billion it put into GEO in August. According to the FT, Eli Broad pulled his money out as well. It seems that redemptions must not be so bad anymore if Goldman can do it in their own funds without anyone really caring. HMMMM? Maybe they could use the cash.

Here’s an excerpt of what Goldman CFO David Viniar said in August about redemptions and the future success of GEO:

“I certainly would hope that even if people were going to redeem, and I don’t know who would have and who wouldn’t have, they obviously would see that we’re pretty confident in the future success of the fund and would not. But I don’t know that that’s going to be the case, but that’s what we’d hope.”

I’ll let you decide what “future success” and being “pretty confident” means.

Supposedly, the quant fund only has $1.2 billion of net assets left compared to more than $5 billion after the August rescue. It’s interesting to see the reverence quant funds get for being able to make money with complex formulas and compare that to the facts of their performance when facing their first real test in the second half of 2007 until today. Are you still impressed?